Business Law and the Regulation of Business Chapter
Business Law and the Regulation of Business Chapter 18: Remedies By Richard A. Mann & Barry S. Roberts
Topics Covered in this Chapter A. Monetary Damages B. Remedies in Equity C. Restitution D. Limitations on Remedies
Compensatory Damages n Contract damages placing the injured party in as good a position as he would have held had the other party performed; equals loss of value minus cost avoided plus incidental damages plus consequential damages. – Loss of Value – value of promised performance minus value of actual performance – Cost Avoided – loss or costs the injured party avoids by not having to perform – Incidental Damages – arise directly out of a breach Consequential Damages – not arising directly out of a breach but arising as a foreseeable result of the breach
Other Damages Nominal Damages – a small sum awarded where a contract has been breached but the loss is negligible or unproved. n Reliance Damages – contract damages placing the injured party in as good a position as she would have been in had the contract not been made. n
Damages for Misrepresentation n n Benefit-of-the-Bargain Damages – difference between the value of the fraudulent party's performance as represented and the value the defrauded party received. Out-of-Pocket Damages – difference between the value given and the value received. Punitive Damages – are generally not recoverable for breach of contract. Liquidated Damages – reasonable damages agreed to in advance by the parties to a contract.
Limitations on Damages n n n Foreseeability of Damages – potential loss that the party now in default had reason to know of when the contract was made. Certainty of Damages – damages are not recoverable beyond an amount that can be established with reasonable certainty. Mitigation of Damages – injured party may not recover damages for loss he could have avoided by reasonable effort.
Remedies in Equity Availability – only where there is no adequate remedy at law. n Types: n – Specific Performance – court decree ordering breaching party to render promised performance. – Injunction – court order prohibiting a party from doing a specific act. – Reformation – court order correcting a written contract to conform with the original intent of the contracting parties.
Restitution Restoration of injured party to position she was in before the contract was made. n Available to: n – Party Injured by Breach – if other party breaches the contract by nonperformance or repudiation – Party in Default – for any benefit conferred in excess of the loss caused by the breach
Restitution Statute of Frauds – if a contract is unenforceable because of the statute of frauds, a party may recover the benefits conferred on the other party in reliance on the contract. n Voidable Contracts – a party who has avoided a contract is entitled to restitution for any benefit conferred on the other party. n
Limitations on Remedies n n Election of Remedies – if remedies are not inconsistent, a party injured by a breach of contract may seek more than one Loss of Power of Avoidance – a party with the power to avoid a contract may lose that power by: – – affirming the contract delaying unreasonably in exercising the power of avoidance – being subordinate to intervening rights of 3 rd parties
Contract Remedies Has the contract been breached? Yes Are legal remedies adequate? No No Remedy No Equitable Remedies may be available No Legal Remedies are available Yes Is there a provision for reasonable liquidated damages? Yes Recovery of liquidated damages Compensatory Damages Reliance Damages Restitution
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